Getting a business loan can be a challenge when you have a low credit score. This leads to an important question: are business loans based on personal credit? In this blog post, we will answer that question, discuss the factors that influence business loan approvals, and provide tips on how to improve your credit score to increase your chances of getting a business loan.
Are Business Loans Based on Personal Credit?
The short answer is that it’s always better to assume that lenders will factor in your personal credit when assessing your creditworthiness for a business loan.
This can be especially true for unsecured loans. In that case, most lenders will want to evaluate your personal creditworthiness to determine the level of risk they would face should they decide to lend you money.
If you’re applying for a line of credit or a merchant cash advance, your personal credit score will also be a factor the lender considers. However, lenders will also look at other factors, including how well your business is doing, how long you’ve been in business, and how much revenue you generate.
On the other hand, if you’re applying for a secured loan, such as an equipment loan or a commercial vehicle loan, the lender is more likely to focus more on your business credit score and the collateral you’re putting up to secure the loan. However, keep in mind that your personal credit score could still be a factor if the lender needs to assess your personal financial situation to determine if you can afford to make the loan payments.
What To Do if You Have a Low Credit Score
When it comes to securing business loans, having a good credit score can be critical. Lenders use credit scores to assess an applicant’s risk level, which determines whether the borrower is approved or denied. The higher your credit score, the more likely you are to be approved for a loan, and the lower the interest rate you’ll pay.
This means that if you have a low credit score, you’ll have a harder time getting approved for a loan, and if you do get approved, you’ll pay a higher interest rate.
If you have a low credit score, there are steps you can take to improve it and increase your chances of getting approved for a business loan. These include paying your bills on time, keeping your credit card balances low, and disputing any errors on your credit report.
You can also use other financing options designed for businesses with a less-than-ideal credit history, such as revenue-based loans. In a revenue-based loan, the income your business generates is the main factor determining if your loan is approved, making it a good option for organizations with strong cash flow but bad credit.
Wrapping It Up
Getting a business loan depends on various factors, including your personal credit score and the type of loan you’re applying for.
While securing a loan can be challenging, keeping your personal credit score high and staying current on your bills and debts can increase your chances of getting approved.
But even if you don’t have a great credit score, you still have options such as revenue-based loans.
Gellyfish: Certainty of Execution in Commercial Loans
At Gellyfish Commercial, we offer commercial financing solutions with the certainty of execution you need to take your business to the next level.
We are located in Riverside, and work with clients all over California and beyond. Contact us today by email (info@gellyfishcommercial.com), telephone (877-800-4493), social media (Facebook, Twitter, LinkedIn), or through the live chat on our home page to schedule a free consultation.
